Venture capitalists usually adore successful serial entrepreneurs. Many, however, make an exception for Adeo Ressi.

That’s because Ressi’s latest start-up, TheFunded.com, provides a forum for entrepreneurs to anonymously critique and sometimes excoriate VCs who ticked them off.

A recent post about an East Coast firm opened with this: “Small time guys who make up for their lack of power with arrogance.” Attorneys for Palo Alto-based Hercules Capital sent Ressi a “cease and desist” letter after a posting that began, “Horrible. Avoid like the plague.”

Ressi did not remove the offending post and says he presumes the legal threat is “dead.” Hercules declined to comment.

While verbal abuse makes TheFunded a provocative read, Ressi is quick to point out that the members-only site is also rich in rave reviews and has a new discussion feature in which entrepreneurs share advice. (Membership is free for company founders; a fee is charged to other interested parties, such as attorneys and pension fund managers.)

TheFunded was launched quietly in early 2007 and stirred controversy as its membership grew. It had an air of mystery because Ressi cloaked his identity as “founding member” until November. He revealed his role at a Palo Alto reception sponsored by Wired magazine to trumpet its exclusive profile of him.

TheFunded originated in New York, where Ressi was well-known as a founder of Game Trust, which was sold in 2007 to Real Networks for a undisclosed sum “in the tens of millions” of dollars, Ressi said. Ressi’s first start-up later became part of AOL.

TheFunded began as “weekendware,” Ressi says, but it’s now a full-time endeavor that attracts 50 to 200 applications a day for membership. To make the most of TheFunded, Ressi this month moved from Brooklyn to Palo Alto – “to be in the belly of the beast,” he said with a laugh.

Ressi insists says he’s here to help. Honest. The following is an edited transcript of a recent Mercury News interview at his newly rented home.

Q What were the experiences as founder and CEO of Game Trust that inspired you to create TheFunded?

A It was a collection of events: Softbank pulled final investment paperwork in the 11th hour after making me sign an exclusive dealings clause. I was forced to hire people who were not very competent by venture capitalist board members. One board member was gunning to fire me because of decisions we made collectively.

What I saw was consistently bad practices. They were not helping me build the business, but were hurting my chances of success as a CEO and my company’s chance to grow.

It got so frustrating. I just said, wow, if I’m experiencing these things, I wonder if anyone else is. When I talked to other CEOs, I would invariably hear of an experience that was worse than the particular problem I was facing. One had been locked out of his office. He was the CEO!

And I had good experiences with venture capitalists, too. The ability for the great ones to add value and ability for the bad ones to hinder succeess was so great that I said to myself I would never raise venture capital again until I knew who was bad and who was good.

Q How do VCs react to TheFunded?

A I think venture capitalists go through four phases.

First, it’s denial. Or really, it’s discrediting. They think: Oh, it’s a bunch of inexperienced, anonymous rejects who are venting their frustrations. So I’m not even going to read it.

Then it’s anger. Most venture capitalists have never been criticized to their face, publicly, in print, in any form whatsoever. And for the first time they’re seeing criticism about their performance, behavior, attitude, decisions. And this is shocking and angers them. I’m not judging whether the criticism is true or false.

The third step is they try to manipulate it. And this is like the bane of my existence.

For a lot of them, control is the name of the game of venture capital. They’re not loaning you money. They’re giving you money in exchange for control. That control comes in the form of preferred stock, rights, board seats. So they are used to games of control, so they look at TheFunded as something they want to control. They use it by trying to manipulate the data.

I was asked at least a dozen times to write reviews of VCs before people knew I was the founding member. True story. Literally, please write a review for me on TheFunded, I really could use the help. So I know that goes on all the time.

Q Is that such a bad thing? That gets traffic to your site, more reviews. Some people might damn with faint praise.

A In the very early days of the site, I would encourage it, thinking we may get one bogus review for that asked-for one, and 10 honest ones from people who didn’t ask.

Then I got a letter from a CEO who actually included what the VC wrote and said: Even though he isn’t asking me to write a positive review, the very asking implies it. I feel uncomfortable about this.

So now we have members disclose whether the VC solicited the review, to alert readers. There are all sorts of check-and-balance mechanisms we put in place. I spend a lot of development time trying to ensure honest and accurate reviews.

Q And the fourth phase?

A They come to accept and learn from it. I think most venture capitalists should take the feedback on the site seriously, because that’s how they will have the greatest chance to be a better VC.

Some of the best things I’ve read are positive commentary about what people have done to help them. I do think it’s a two-sided coin here. You don’t just learn what not to do. You can also learn what to do. There’s a lot of stories about exceptional funds that go above and beyond the call of duty.

Q A survey by the National Venture Capital Association forecasts an industry shakeout this year, as unsuccesful funds expire. TheFunded is making waves at an interesting time. What do you foresee?

A I completely agree with the forecast that there is going to be a shakeout. I see it from the entrepreneurs’ perspective. There are firms that are not going to be able to correct their behavior and they will lose all notable deal flow, because no entrepreneur will pitch them.

If you treat an entrepreneur badly, if you steal their ideas and if you engage in unscrupulous power plays – and all this information is known – I can’t imagine a CEO in their right mind who would pitch you. And that’s happening now. . . . Talented, smart CEOs are reading this and making decisions on where to take their business for investment.

And that brings up the second point. Probably the most important prediction I make, reading all that I read, is that the entire venture capital system as it exists today will become more like a bank loan.

Terms will be very consistent. Today, term variation is at an extreme, and terms will become incredibly more homogenous compared to where they are today. There will still be variance, but it will be controlled variance. It will be more like a bank loan than a hostage negotiation.

Q It’s understandable that VCs may not appreciate a comparison to kidnappers.

A Today, honestly, VC deals do have a lot of resemblance to hostage negotiations. You’ve got a party with all the power, and a hostage in the company. And they try to extract the greatest value that they can from the asset. In fact, the analogy is correct.

Q How quickly will changes come? What will the entrepreneurial culture look like?

A I believe that in the next 18 months there will be fundamental changes in the way venture operates. There will be more specialization. You should be able to match against the perfect fund and the perfect partner for your needs.

There will be a massive consolidation in the venture world. Not the classic consolidation, like a roll-up consolidation. But money will start flowing to the guys who get the model right.

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